Jurimex Kommerz v. Case Corp

Opinions of the United
2007 Decisions States Court of Appeals
for the Third Circuit
7-27-2007
Jurimex Kommerz v. Case Corp
Precedential or Non-Precedential: Non-Precedential
Docket No. 06-3523
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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 06-3523
JURIMEX KOMMERZ TRANSIT G.M.B.H.;
JURIMEX KOMMERZ TRANSIT AGRAR
CONSULTING PROJEKT KAS G.M.B.H.; ARGE IPC-JURIMEX,
Appellants
v.
CASE CORPORATION
Appeal from the United States District Court
for the District of Delaware
(D.C. Civil Action No. 00-cv-00083)
District Judge: Honorable Joseph J. Farnan, Jr.
Submitted Under Third Circuit LAR 34.1(a)
July 9, 2007
Before: RENDELL and AMBRO, Circuit Judges,
SHAPIRO,* District Judge
(Opinion filed July 27, 2007)
OPINION
*
Honorable Norma L. Shapiro, Senior District Judge for the Eastern District of
Pennsylvania, sitting by designation.
AMBRO, Circuit Judge
Plaintiffs below (Jurimex Kommerz Transit G.M.B.H.; Jurimex Kommerz Transit
Agrar Consulting Projekt Kas, G.M.B.H; and Agre IPC-Jurimex (collectively “Jurimex”))
challenge the District Court’s grant of summary judgment in favor of Case Corporation
(“Case”) on the issue of whether Case can be held liable for the actions of its subsidiaries
based on agency principles. We agree with the District Court that Jurimex failed to come
forward with evidence sufficient to create a genuine issue of material fact, and therefore
we affirm.
I.
As we write for the parties, only a brief recitation of the relevant background is
necessary. This case involves alleged liability stemming from an international business
transaction. Jurimex is an Austrian company that facilitates commodity and machinery
deals between businesses in Eastern Europe and the former Soviet Union and their
counterparts in Western Europe and the United States. It alleges that it entered into an
agreement with representatives from Case’s European subsidiaries to be part of the sale of
combines from Case, a manufacturer of agricultural equipment, to Golden Grain, a buyer
in Kazakhstan. Jurimex then alleges that it was cut out of the Golden Grain transaction
and that Case should be held liable based on a variety of legal theories.
Jurimex brought suit against Case, the U.S. parent corporation, in the United States
District Court for the District of Delaware. Upon a motion to dismiss by Case, the
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District Court dismissed Jurimex’s complaint because Case’s European subsidiaries were
indispensable parties but adding them would destroy diversity jurisdiction. The District
Court also denied a motion by Jurimex for leave to amend its complaint to allege that
Case was liable, independently from its subsidiaries, based on agency principles. Jurimex
appealed; we affirmed the District Court’s dismissal but reversed its denial of Jurimex’s
motion for leave to amend. Jurimex Kommerz Transit G.M.B.H. v. Case Corp., 65 Fed.
Appx. 803 (3d Cir. 2003). We instructed the District Court to allow Jurimex to amend its
complaint to allege that an agency relationship between Case and its subsidiaries gave rise
to Case’s liability. Id. at 808.
Jurimex amended its complaint and the parties conducted discovery. Following
discovery, Case moved for summary judgment on a variety of grounds, including that
Jurimex could not sustain its claims based on agency principles. Jurimex countered that
there was evidence in the record supporting its agency theory of liability through either
actual or apparent authority. The District Court, reaching only the agency issue, granted
summary judgment to Case, concluding that Jurimex had failed to come forward with
evidence to create a genuine issue of material fact. Jurimex once again appeals.1
II.
“We review the District Court’s grant of summary judgment de novo.” Justofin v.
1
The District Court had jurisdiction under 28 U.S.C. § 1332. We have jurisdiction
under 28 U.S.C. § 1291.
3
Metro. Life Ins. Co., 372 F.3d 517, 521 (3d Cir. 2004) (quoting Fakete v. Aetna, Inc., 308
F.3d 335, 337 (3d Cir. 2002)). Accordingly, we apply the same standard employed by the
District Court. We will affirm its grant of summary judgment if “there is no genuine
issue as to any material fact and . . . the moving party is entitled to a judgment as a matter
of law.” Fed. R. Civ. P. 56(c). “A fact is material when its resolution ‘might affect the
outcome of the suit under the governing law,’ and a dispute about a material fact is
genuine ‘if the evidence is such that a reasonable jury could return a verdict for the
nonmoving party.’” Justofin, 372 F.3d at 521 (quoting Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 248 (1986)). To defeat a motion for summary judgment, the non-moving
party must “do more than simply show that there is some metaphysical doubt as to the
material facts. In the language of the Rule, the non-moving party must come forward
with ‘specific facts showing that there is a genuine issue for trial.’” Matsushita Elec.
Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586–87 (1986) (citations omitted).
While a parent corporation ordinarily is not liable for the acts of its subsidiary, “a
parent may be held liable for the activities of its subsidiary” based on “an application of
general agency principles.” Phoenix Can. Oil Co. v. Texaco, Inc., 842 F.2d 1466, 1477
(3d Cir. 1988). Furthermore, “[n]ot only must an arrangement exist between the two
corporations so that one acts on behalf of the other and within usual agency principles,
but the arrangement must be relevant to the plaintiff’s claim of wrongdoing.” Id. In other
words, the relevant inquiry for determining whether Case’s European subsidiaries were
4
acting as its agents necessarily must focus on the “specific transaction” that gave rise to
the alleged liability—in this case, the Golden Grain transaction. Id. at 1478 (“In
conducting this review, the focus must be directed to the pertinent cause of action. . . .
The evidence of relationship between the parents and subsidiaries as it bears on that
breach of contract is the proper subject of our inquiry.”).
A.
Jurimex alleges liability under both actual and apparent authority. “Actual
authority is that authority which a principal expressly or implicitly grants to an agent.”
Billops v. Magness Constr. Co., 391 A.2d 196, 197 (Del. 1978).2 Actual authority “to do
an act can be created by written or spoken words or other conduct of the principal which,
reasonably interpreted, causes the agent to believe that the principal desires him so to act
on the principal’s account.” Restatement (Second) of Agency § 26 (1958); see also
Restatement (Third) of Agency § 3.01 (2006). Regardless what form the authorization
takes, an essential requirement for establishing actual authority is that it stem from a
manifestation by the principal. See Restatement (Second) of Agency § 15; Restatement
(Third) of Agency § 3.01 cmt. b.
After examining the evidence presented by Jurimex, the District Court concluded
that Jurimex could point to no evidence by which Case authorized its European
2
Both parties operate under the assumption that Delaware law governs the agency
relationship. As in the prior appeal, “we will proceed on that assumption” as well.
Jurimex Kommerz Transit G.M.B.H, 65 Fed. Appx. at 807 n.3.
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subsidiaries to negotiate on its behalf in the Golden Grain transaction. See App. at 7–8.
We agree.
Jurimex contends that Case’s own Rule 30(b)(6) witness, Brian Cahill, testified
that employees of Case’s European subsidiaries were authorized to transact business on
behalf of Case. Jurimex misconstrues Cahill’s testimony. Although he testified that any
of the employees of Case’s subsidiaries “with sufficient authority under the delegation”
could theoretically act on Case’s behalf, App. at 209, he further testified that the
employees of subsidiaries only received such authorization on a “one-off basis” “[f]or a
particular transaction,” App. at 216. Additionally, he testified that the only situation he
knew in which such a delegation to a European subsidiary had taken place was in a
transaction unrelated to the Golden Grain transaction. See App. at 209, 219. Because
evidence of the agency relationship must be specific to the transaction from which the
alleged liability arises, Cahill’s testimony does nothing to show that Case authorized its
European subsidiaries to act on its behalf in the Golden Grain transaction.
The other evidence to which Jurimex points in support of actual authority is also
deficient. Vague second-hand statements allegedly from employees of the European
subsidiaries about Case’s general interest in the deal, see, e.g., App. at 828, and oblique
references to “Case Corporation” in correspondence from third parties, see App. at
623–30, even if admissible, are not evidence of actual authority. That type of evidence
does not show a manifestation by Case, the principal, that its European subsidiaries were
6
authorized to negotiate on its behalf with Jurimex in the Golden Grain transaction. See
Restatement (Second) of Agency § 15; Restatement (Third) of Agency § 3.01 cmt. b.
Furthermore, evidence of Case’s subsequent involvement in the Golden Grain transaction,
in the limited role of a guarantor for a loan that helped finance the transaction and after
Jurimex was no longer involved, see, e.g., App. at 645, 740, in no way shows that Case
had authorized its European subsidiaries to act on its behalf in the earlier negotiations
with Jurimex. See Don Kemper Co. v. Beneficial Standard Life Ins. Co., 404 F.2d 752,
756 (3d Cir. 1968) (“Alleged subsequent agency authority, real or apparent[,] is of no
help to plaintiff here. . . . [E]vidence of something occurring on a later date to show that
type of authority is irrelevant to [plaintiff’s] claim.”).
In sum, we agree with the District Court that, based on the evidence offered by
Jurimex, “no jury could reasonably find that [Case’s] subsidiaries had actual authority to
act on [Case’s] behalf.” App. at 8.
B.
Jurimex’s claim of apparent authority fares no better. “[I]t is well settled that
apparent authority (1) results from a manifestation by a person that another is his agent
and (2) exists only to the extent that it is reasonable for the third person dealing with the
agent to believe that the agent is authorized.” Taylor v. Peoples Natural Gas Co., 49 F.3d
982, 989 (3d Cir.1995) (internal quotations omitted); see also Restatement (Second) of
Agency § 27; Restatement (Third) of Agency § 3.03. As with actual authority, apparent
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authority is only established through manifestations by the principal, and a third party’s
belief that the agent is authorized must be “traceable to the manifestation.” Restatement
(Third) of Agency § 3.03.
Jurimex’s apparent authority argument focuses mainly on the fact that Case had
been involved in earlier transactions with Jurimex entities for sales in Volgograd, Russia.
There is some evidence that Case’s European subsidiaries were acting on behalf of Case
in transactions related to Volgograd, but these prior dealings do not give rise to the
alleged liability that Jurimex is ascribing to Case in this lawsuit. “To bind a principal by
its agent’s acts, the plaintiff must demonstrate that the agent was acting on behalf of the
principal and that the cause of action arises out of that relationship.” E.I. DuPont de
Nemours and Co. v. Rhone Poulenc Fiber and Resin Intermediates, S.A.S., 269 F.3d 187,
198 (3d Cir. 2001) (emphasis added). As previously stated, the relevant inquiry for
agency liability is whether the agency relationship existed with regard to the specific
transaction or transactions that gave rise to the claim. Thus, whether Case had previously
authorized its European subsidiaries to act on its behalf is not relevant to whether an
agency relationship existed with regard to the Golden Grain transaction.
Jurimex insists that, based on the Volgograd transactions, it reasonably believed
that Case was the principal in the Golden Grain transaction. Merely because an agent has
been authorized to act on behalf of a principal in the past does not mean that the agent is
later “cloaked with apparent authority.” Nat’l Mortgage Warehouse, LLC v. Bankers
8
First Mortgage Co., 190 F. Supp. 2d 774, 781 (D. Md. 2002). This is particularly true in
this case, given the undisputed evidence that it was Case’s practice to authorize its
subsidiaries to act on its behalf only on a transaction-by-transaction basis. See App. at.
216; Restatement (Second) of Agency § 34(b) (“An authorization is interpreted in light of
. . . the business methods of the principal.”); see also id. § 37(2) (“The specific
authorization of particular acts tends to show that a more general authority is not
intended.”). The Fourth Circuit’s admonition in an earlier case is applicable to Jurimex
here: “[T]he mere fact that one is dealing with an agent, whether the agency be general or
special, should be a danger signal, and, like a railroad crossing, suggests the duty to ‘stop,
look, and listen,’ and he who would bind the principal is bound to ascertain, not only the
fact of agency, but the nature and extent of the authority.” Standard Acc. Ins. Co. v.
Simpson, 64 F.2d 583, 589 (4th Cir. 1933).3
Jurimex also contends that Case somehow ratified authority granted to its
European subsidiaries in the Volgograd transactions through its silence or inaction in the
Golden Grain transaction and through the alleged retention of benefits from that
transaction. Because Jurimex failed to raise this argument in the District Court, it is
waived. Even if the argument were not waived, it would be unavailing. Indeed, the
3
Furthermore, as discussed previously, any involvement of Case in the Golden
Grain transaction after Jurimex was allegedly ousted from the deal cannot as a matter of
law serve as a basis for Jurimex to believe that Case had authorized its European
subsidiaries to act on its behalf when negotiating with Jurimex. See Don Kemper Co.,
404 F.2d at 756.
9
argument that Case was silent during the Golden Grain transaction is a telling admission
that Jurimex can point to no manifestation by Case that it had authorized its subsidiaries
to act on its behalf when dealing with Jurimex in that transaction. Moreover, Jurimex’s
argument regarding the retention of benefits fails because, even if Case ultimately
received some benefit from the Golden Grain transaction (as parent corporations often do,
even from their subsidiaries’ independent dealings), this does not mean that the European
subsidiaries were acting on Case’s behalf when negotiating with Jurimex. The alleged
retention of benefits is not a ratification here because it is not “conduct justifiable only on
the assumption that [Case] consent[ed] to be bound” as principal in the negotiations with
Jurimex. Restatement (Third) of Agency § 4.01 cmt. d.
In sum, Jurimex has not sustained its burden on summary judgment of coming
forward with evidence to create a genuine issue of material fact with regard to apparent
authority.4
III.
Finally, we discern no abuse of discretion in the District Court’s decision to deny
discovery of matters unrelated to the Golden Grain transaction. As indicated above,
Jurimex had to show that the European subsidiaries of Case had the authority to act on its
behalf in the Golden Grain transaction negotiations with Jurimex. The District Court’s
4
As we agree with the District Court that summary judgment was appropriate on
the agency issue, we need not reach the alternate bases for summary judgment argued by
Case.
10
conclusion that documents unrelated to the Golden Grain transaction were irrelevant was
no abuse of discretion.
We also reject Jurimex’s argument that it was entitled to an adverse inference
because of an alleged failure of Case to produce documents. Case represents that it has
produced all documents in its possession and control concerning the Golden Grain
transaction, and there is no evidence of destruction or withholding to warrant an adverse
inference.
****
For all of the above reasons, we affirm the judgment of the District Court.
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